GST: STEP
TOWARDS TAX
REFORM IN INDIA
~ Kartikey Kesarwani [College of Legal Studies, University of Petroleum & Energy Studies, Dehradun]
No system of federation can be successful unless both Union
and the states have at their disposal adequate financial resources
to enable them to discharge their respective responsibilities
under the Constitution. It is very necessary that both Union and
States are autonomously funded so that neither feels any burden
on them with regards to tax monitoring. With the quasi federal
system followed by the country, both the center and the states
participate in the collection of taxes.
However, due to a large number of direct and indirect taxes
levied by the Central and State governments, often carrying out a
business becomes very difficult. Right from starting a business to
its functioning, a businessman is required to pay different types of
taxes which have to be maintained on two different records.
Such a situation often causes the businessmen to evade the taxes
so as to save his hard earned income and escape the agony of
filing taxes.
The taxation system in India is one of the most complicated tax
systems in the world. The distribution of sources of revenue
between Union and the States are based on the three lists
provided in the Seventh Schedule of the constitution wherein the
subjects are divided into three lists: Union, State and the
Concurrent lists. Union and the states make laws on to their
allotted subjects as per the list.
To overcome the hardship caused to the taxpayers due to a
plethora of taxes, Government has proposed to bring into
effect the Goods and Services Tax which is a value tax and is
being used widely in more than 150 countries. The idea of
GST was first mooted by the, then Union Finance Minister
Shri P. Chindambaram in his union budget of 2006-2007.
The Goods and Services tax is a very significant step in the
taxation laws of the country since it seeks to replace all
indirect taxes levied on the goods and services by the Indian
central and state government. If implemented, GST will
amalgamate a number of Central and State taxes into a single
tax and hence the concept of indirect tax will be pulled up
from the Indian taxation system.
For the implementation of GST, the Constitution (122nd
Amendment) Bill, 2014 was introduced for the first time in
Lok Sabha on December 19, 2014 by the Finance Minister
Mr. Arun Jaitley. Powers between the Centre and the States
are clearly demarcated in the Constitution and so there is
almost no overlap between them. Hence, changes in the bill
will have to be in relation to the well-established rules of
constitutional interpretations such as doctrine of repugnancy,
jurisprudence on deemed sale, and rule of harmonious
construction of legislative entries.
Also, introduction of the GST would require amendment in
the Constitution so as to concurrently empower the Centre
and the States to levy and collect GST. The assignment of
concurrent jurisdiction to Centre and the States for the levy
of GST would require a unique institutional mechanism. For it
to be effective, such a mechanism will also need to have
Constitutional force.
The Amendment Bill contains 21 clauses which gives the idea
about the implementation of GST in the country. Cl.2 states
that both the Parliament and the State Legislature shall be
enabled to frame laws with respect to the GST. The taxes
levied by the center or the states will be replaced by the GST.
All the taxes will be merged into a single one with a tax-rate
which is uniform in all over India. The main reason behind the
uniformity is that these taxes act as a barrier, which is proved
to be unfair.